1. strategy+business
ONLINE OCTOBER 15, 2012
BY DEANNE AGUIRRE, LEILA HOTEIT,
AND KARIM SABBAGH
How to Keep the Promise
of the Third Billion
A new index of countries links their future prosperity to raising
the status of women.
2. A
How to Keep the Promise of the
Third Billion
A new index of countries links their future prosperity to raising the status
of women.
by DeAnne Aguirre, Leila Hoteit, and Karim Sabbagh
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s political leaders around the world struggle Third Billion,” by DeAnne Aguirre and Karim
Empowering Inputs, Integrating Outputs
with economic headwinds, many of them are Sabbagh, s+b, Summer 2010.) Yet the women of the
neglecting one of their most significant oppor- Third Billion have been largely overlooked in many
tunities: raising the status of women, especially those in countries, and actively held back in others.
emerging economies. Nearly 1 billion women could This is a far more complex problem than fostering
enter the global economy in the coming decade, moving economic growth in a single country, because women
into roles as employees, executives, and entrepreneurs. are scattered around the globe and they face a range of
So far, many of these individuals have been economical- obstacles. In both developed and developing economies,
ly stunted, underleveraged, or held back, to the point women have lower rates of labor-force participation and
where they are invisible to the global economy. By receive lower pay than men for the same work. The eco-
standing in their way, countries are letting a valuable nomic gains among this group to date have often come
resource sit idle. despite strong societal forces opposing them. Indeed,
Who are these women, and why is the status of the factors that keep women out of national economies
women so important? According to data from the are so widespread and interconnected that governments
International Labour Organization, a United Nations and companies seeking to help the Third Billion have
agency that tracks global workforce statistics, roughly hardly known where to start.
865 million women will be of working age (between the Now, however, a new body of quantitative evidence
ages of 20 and 65) by 2020, yet will still lack the funda- shows, country by country, how best to empower
mental prerequisites to contribute to their national women and leverage this valuable asset. A clear set of
economy. Either they don’t have the necessary education policies has emerged that will put more women into the
and training to work, or — more frequently — they workforce and foster more women-owned businesses,
simply can’t work, owing to legal, familial, logistical, and leading to stronger and healthier societies and more
financial constraints. Of these 865 million people, 812 competitive national economies.
million live in emerging and developing nations.
We call this group the Third Billion, because their
economic impact will be just as significant as that of the These guidelines were a result of the Third Billion
billion-plus populations of China or India. (See “The Index, an in-depth research project that assesses the per-
3. DeAnne Aguirre Leila Hoteit Karim Sabbagh Also contributing to this article
were Booz & Company partner
is a senior partner with Booz & is a principal with Booz & is a senior partner with Booz & Christine Rupp; senior
Company based in San Company’s Middle East Company and the leader of the associate Joanne Alam; and
Francisco. She leads the firm’s public-sector practice, where firm’s communications, media, senior research analyst
work on organizational and she focuses on human capital and technology practice in the Mounira Jamjoum; contribut-
talent effectiveness. development. Middle East. He is also ing writer Jeff Garigliano, and
chairman of the Ideation former Booz & Company
Center, Booz & Company’s senior editor Melissa Master
think tank in the Middle East. Cavanaugh. The not-for-profit
La Pietra Coalition maintains
a website on the
Third Billion Campaign:
www.thethirdbillion.org/.
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deanne.aguirre@booz.com leila.hoteit@booz.com karim.sabbagh@booz.com
formance of more than 100 countries in economically Countries that have a solid foundation of empowering
empowering women. To reach these conclusions, our inputs — policies aimed at giving women a footing
team of Booz & Company researchers started with eco- equal to that of men in the workplace and the national
nomic data from the World Economic Forum and the economy — have yielded significantly better results.
Economist Intelligence Unit, both of which study the The linkage is clear, and governments need not experi-
workforce gender gap and women’s economic issues. ment or wonder what might work.
Each organization publishes a gender parity index Some countries have already put these policies into
that is fairly broad. Between them, they cover all aspects place and are generating results. For example,
of women’s well-being — including access to healthcare, Argentina, one of the countries that showed a strong
legal rights, and political participation. However, we correlation between inputs and outputs, was among the
excluded those issues from our analysis, in order to focus first Latin American nations to enact legislation regulat-
specifically on the world of work. In doing so, we did ing working conditions for women and children. It has
not wish to downplay these issues; instead, our goal was a strong education system, in which more girls complete
to isolate the factors that directly correlate to economic secondary and tertiary education today than boys.
empowerment for women, akin to controlling for cer- (Although this is true of some other emerging
tain variables in a laboratory experiment. economies, it’s rare in Latin America.) Women have
Our model looked at the performance of countries advanced in the political sphere as well: Since 2007, the
on three specific groups of “inputs,” or policies put in country has had a female president, Cristina Fernandez
place to economically empower women. These were de Kirchner, and women account for 24 percent of the
equal education opportunities for girls; access-to-work national parliament — the highest proportion in the
laws; and entrepreneurial support (such as credit, train- world.
ing, and other forms of assistance). Similarly, Japan has a strong legal foundation of
Next we looked at “outputs,” or indications of how support for women. Its constitution mandates gender
well women had been integrated into national equality, and the country passed equal opportunity laws
economies. Our three output groups were inclusion back in 1986. Additional policies have followed, such as
(female labor force participation); advancement (the the 2001 law on men and women’s common social par-
number of women among professional workers, busi- ticipation, which aims to eliminate discrimination
ness leaders, and company owners); and equal pay for against women. As a result, Japan has a relatively high
equal jobs in practice. rate of female participation in the workforce.
The central hypothesis of the Third Billion Index More broadly, research on the Third Billion sug-
was that stronger inputs should correlate with stronger gests that economically empowering women spurs GDP
outputs: The stronger the policies for their empower- growth. Our estimates, which are conservative, indicate
ment, the greater the economic status of women would that if female employment rates were to match male
be. The findings strikingly backed up this hypothesis. employment rates in the United States, overall GDP
4. Relative Progress
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would increase by 5 percent. In Spain, such a change says Cherie Blair, founder of the Cherie Blair
could raise GDP by 10 percent. In developing Foundation for Women, which supports entrepreneurs
economies, the effect is even more pronounced. The in Asia, Africa, and the Middle East. “This is more true
United Arab Emirates would see a boost of 12 percent today than ever before. With the global economy still
in GDP, and the Egyptian economy would grow by 34 struggling through a slow and spotty recovery, it is in
percent. everyone’s interest to help women make the most of
Finally, these policy initiatives don’t merely benefit their potential. No real social progress is possible with-
women. Rather, they improve socioeconomic condi- out the economic progress of the Third Billion.”
tions for everyone. In addition to inputs and outputs,
we analyzed a third set of data points that we called
“outcomes,” such as per capita GDP, literacy rates, and Before anyone pops open the champagne, we need to
infant mortality. These were independent of the input emphasize that the notable achievements, in virtually all
and output variables, but we hypothesized that coun- cases, represent relative progress, not absolute success.
tries with strong performance in economically empow- Many of the countries that scored highest in our rank-
ering women, as measured by the first two sets of ings benefited from comparisons against others with
variables, would have stronger results in these societal poorer track records in empowering women. For exam-
measures as well. ple, Germany ranked very high in the equal-pay catego-
Again, the correlation that we had expected to see ry (along with other developed nations such as
showed up clearly in the results. Positive steps intended to Australia, the Netherlands, Norway, and Sweden).
economically empower women not only contribute to the However, women in virtually all of these countries still
immediate goals of mobilizing the female workforce, but earn lower salaries than men. In Germany, women on
also lead to more widespread gains for all citizens, such as average earn 23 percent less than men earn for similar
economic prosperity and improvements in health, early work.
childhood development, security, and freedom. Some of that disparity stems from structural differ-
In short, the economic advancement of women ences. German women with greater family responsibili-
doesn’t just empower women; it results in greater overall ties and obligations often choose to avoid demanding
prosperity. This idea has been a consistent theme in the careers that require long hours and frequent travel.
literature of women’s issues, but it is typically argued with However, even correcting for these differences and assess-
anecdotal rather than quantitative results. Our findings ing only the salaries of men and women holding similar
show that economically empowering women is the key jobs, with similar tenure and qualifications, there is a
to greater societal gains. One reason is that women enter- salary gap of approximately 8 percent. That’s better than
ing the workforce increase the overall labor force, mak- most other countries, and it represents a genuine
ing countries more productive and increasing GDP. advance, but it’s still not equal pay for equal work.
There is a multiplier effect as well. Women are Similarly, in the U.S., although women are rising
more likely than men to invest in their children’s educa- into the ranks of middle management, they are not yet
tion, which can lead to a boost in economic growth, taking the final step into senior positions. In 2011,
especially as those children grow up and enter the work- women held just 16.1 percent of board seats at Fortune
force themselves. Moreover, women who are economi- 500 companies and 14.1 percent of executive officer
cally active tend to have fewer children, and this often positions. Less-developed countries have even worse
translates to fewer children in poverty. records: A World Economic Forum survey of Indian
“Giving women the chance to become financially employers in 2010 found that women employees held
independent and make the most of their talents is the just one in 10 of the senior management positions at
key to higher living standards and stronger economies,” responding companies.
5. Common Challenges
The Burden of Care. In rich and poor countries, the
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ed to small, informal businesses in the service sector,
Insufficient Representation in Upper Management.
The precise blend of policy initiatives and private-sector rather than startups in key sectors such as technology. In
efforts to economically empower women will vary other cases, lending policies unfairly burden women. In
according to local needs. In general, however, most China, for example, many lenders base loan decisions
countries will have to address a similar set of challenges: on collateral, rather than cash flow. This particularly
affects women, who have far lower rates of property
responsibility for children, the sick, and the elderly falls ownership than men in the country.
almost exclusively on women. Women in the countries Clearly, governments cannot — and should not —
of the Organisation for Economic Co-operation and simply force banks to lend to a specific business seg-
Development (OECD) spend about 2.4 hours more ment, including women-owned businesses. Those kinds
than men on unpaid work (including care work) each of heavy-handed interventionist approaches have the
day. In less-developed countries, unpaid work also potential to damage the credibility of recipients. Yet reg-
includes household chores that compensate for a lack of ulators can at least ensure that the playing field is level.
infrastructure, such as getting water and finding fuel. A recent study in Italy found that women running small
One study found that if care work were assigned a mon- businesses were charged higher interest rates than men
etary value, it would constitute between 10 and 39 per- for overdraft privileges, even though the women had
cent of GDP. slightly better credit histories than the men. Moreover,
Many of these practices are grounded in deep cul- for key industries that a country seeks to foster, such as
Lack of Credit. Credit is another universal issue
tural norms. In China, for example, eldercare is viewed technology, the government can create tax breaks and
as a woman’s tianzhi, or heavenly duty. As a result, some other incentives to direct capital to areas where it can do
95 percent of Chinese women have eldercare responsi- the most good.
bilities, and 58 percent help support their parents finan-
cially. In Brazil, education policies add to the burden on The glass ceiling persists. Study after study shows that
women. The standard school day is just four hours in boards of directors and C-suite executives are still over-
some regions of the country, requiring that women take whelmingly male, even in countries where women now
care of children during the remainder of the day (and represent a higher percentage of college graduates than
leading to lower education outcomes as well). men and even more of the overall labor force in many
Governments can intervene to better care for these countries. Thus, the European Commission is exploring
populations and free women to work if they choose. the use of quotas to promote gender parity on boards.
This intervention need not take the form of state-run Some countries, including France, Iceland, Italy,
facilities. Even policy shifts can spread the responsibility Norway, Spain, and Sweden, have adopted such quotas
for care. For example, several years ago, Germany began voluntarily. Deutsche Telekom has promised that by
offering a bonus of two months’ pay if fathers took 2015, 30 percent of its leadership positions will be held
paternity leave; the number of fathers exercising this by women.
option doubled in the first year. The private sector can The use of quotas may seem like a blunt instru-
take steps to address this issue as well, through more ment, but it should be seen as a stopgap measure until
flexible work schedules and by offering on-site day care cultural and business mores have evolved sufficiently
facilities. and women can take their rightful place on the execu-
tive floor. When Norway introduced boardroom quotas
affecting women. Many women’s lending programs thus nearly 10 years ago, the policy was controversial. Yet it
far have been limited to microcredit — systems based has generated results. In 2003, only 7.3 percent of
on small loans backed up by community activity. These Norwegian board members were women. By 2006, the
are better than nothing, but their impact is often limit- number had increased to 21 percent, and today is near-
6. 5
Lack of Support for Entrepreneurs. Finally, female
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businesses and societies. +
ly half. As with credit, simply leaving this issue up to In conclusion, the women of the Third Billion have
market forces is not likely to result in a more equitable the potential to become a tremendous economic force
split between men and women. in global markets over the coming decade. The coun-
tries and companies that can harness this force and eco-
business owners need structured support. The chal- nomically empower women — as employees,
lenges they must overcome to succeed are so widespread entrepreneurs, and executives — will gain a clear edge.
and numerous that they cannot make it alone. In devel- If the social benefit of economically empowering
oped economies, they need access to energy and tech- women is not sufficient rationale to act, the sheer busi-
nology. In developing markets, they need training in ness opportunity should tip the scales. As Caroline
basic business functions. Anstey, managing director of the World Bank, said at a
Networking is another critical aspect of this sup- women’s entrepreneurship event in 2011, “Gender
port, and one that often requires concerted efforts from equality is good in and of itself, and it is smart eco-
both the public and private sectors in developing nomics. But [equality] alone never seems to convince
economies. A Booz & Company survey of 175 entre- anyone.” The findings of the Third Billion Index pro-
preneurs in Saudi Arabia found that more than three- vide a set of operating instructions for how to go about
quarters of respondents received no encouragement economic empowerment: education for girls, policies
from teachers or mentors to start their companies. that give women access to work opportunities if they
Perhaps predictably, among women entrepreneurs, 60 choose to take them, and support for entrepreneurs.
percent of companies were in a handful of sectors where These measures represent investments for the future —
women traditionally launch startups: retail, service, and not just in women, but in stronger, more prosperous
education. Recent changes in Saudi laws now allow
women to invest in higher-growth areas such as real
estate and construction, yet if they are to succeed in
these fields, they will need access to networks and con-
tacts.
There is no one perfect solution to boost female
entrepreneurship, yet a number of measures can help.
Governments can give priorities to women-owned busi-
nesses for procurement contracts. Companies can take
similar steps to ensure they have a diverse supply chain.
Successful women can take part in mentoring programs
for their younger counterparts; women with capital can
reach out to promising young women with good ideas
for new companies.